2009 (6) TMI 111 - HC - Central Excise

Intravenous Fluids falls under Chapter 30 - whether came to be exempted from payment of central excise duty? - Held that - The Joint Secretary is not justified in adding certain words to the notification dated 1-3-2001. It operates prospectively and petitioners were paying excise duty on I.V. Fluids not used for sugar, electrolyte or fluid replenishment. However, the dispute which is involved in the present petitions is pertaining to the period between 4-5-2000 to 28-1-2001 and duty was demanded on the basis of the Circular issued by the Joint Secretary, as per the submissions of the learned Counsels appearing for the petitioners. If it is so, such action of the respondent-authorities cannot be upheld. Therefore the impugned communication issued by the Joint Secretary is not tenable at law and deserves to be quashed and set aside. It cannot be said at this stage that issuance of show-cause notice is without jurisdiction. The petitioners are called upon to explain about their products and if they are Intravenous Fluids, certainly they are entitled to exemption. This issue is yet to be adjudicated and it is not finalised. Hence, in absence of any adjudication, it is not just and proper for us at this stage, to quash and set aside the show-cause notices. Appeal partly allowed

Summary

Issues Involved:
1. Challenge to Circular No. 334/1/2001-TRU dated 28-2-2001.
2. Validity of show-cause notices based on the aforementioned Circular.
3. Retrospective application of exemption withdrawal under Notification No. 6/2000.
4. Jurisdiction of the Joint Secretary to issue clarificatory Circulars.
5. Alternative remedy and writ jurisdiction of the High Court.

Issue-Wise Detailed Analysis:

1. Challenge to Circular No. 334/1/2001-TRU dated 28-2-2001:
The petitioner challenged Circular No. 334/1/2001-TRU issued by the Joint Secretary, Department of Revenue, Ministry of Finance, arguing that it imposed restrictions on the exemption granted to Intravenous Fluids under Notification No. 6/2000. The Court found that the Joint Secretary was not justified in adding certain words to the notification dated 1-3-2001, which operates prospectively. The impugned Circular was deemed not tenable at law and was quashed and set aside.

2. Validity of show-cause notices based on the aforementioned Circular:
The show-cause notices were issued based on the Circular, demanding central excise duty for the period between 4-5-2000 to 28-1-2001. The Court noted that the show-cause notices were not solely based on the Circular but also on an independent examination of the products and seized documents. Therefore, the Court held that the show-cause notices could not be quashed at this stage and must be adjudicated on their merits.

3. Retrospective application of exemption withdrawal under Notification No. 6/2000:
The petitioners argued that the exemption granted under Notification No. 6/2000 could not be withdrawn retrospectively by the Circular. The Court agreed, stating that the benefit granted by Notification No. 6/2000 could not be retrospectively withdrawn by a subsequent notification or Circular. The subsequent Notification No. 3/2001, which restricted the exemption, could not be applied retrospectively to the period covered by Notification No. 6/2000.

4. Jurisdiction of the Joint Secretary to issue clarificatory Circulars:
The petitioners contended that the Joint Secretary had no authority to issue clarifications that effectively amended the statutory notifications. The Court supported this view, citing several precedents where it was held that a Circular could not add conditions to or restrict the scope of a statutory notification. The Circular issued by the Joint Secretary was found to be in excess of jurisdiction and was set aside.

5. Alternative remedy and writ jurisdiction of the High Court:
The respondents argued that the petitioners should exhaust alternative remedies before approaching the High Court. However, the Court held that it could exercise its writ jurisdiction in cases where the impugned actions were without jurisdiction or in violation of natural justice. The Court cited the decision in Collector of Central Excise and Land Customs v. Sanawarmal Purohit, emphasizing that the rule of exhausting alternative remedies is one of convenience and not a strict rule of law.

Conclusion:
The High Court quashed the impugned Circular issued by the Joint Secretary but upheld the issuance of the show-cause notices, directing the respondent authorities to adjudicate the matter based on the available materials and without being influenced by the Circular. The petitioners were allowed to make further submissions before the authorities, and the final order was to be passed in accordance with law. The petitions were partly allowed, and the interim relief granted earlier was vacated.